Cutback In Bean Acres

This week, farmers are starting to plant, or at least getting seriously ready for it. The big question is how much will they plant? Estimates from the Brazilian Ministry of Agriculture, consultants, ag experts and producers point to three critical factors that should affect how much is planted this year.

Credit: Treasury tsar Antonio Palocci apparently lost the keys to public coffers. Cattle ranchers in Mato Grosso do Sul are blaming him for the recent surge of foot-and-mouth disease in that state, as funds allocated for inspection and vaccination financing weren't released as originally slated.

Soybean farmers could have warned their peers, because they have spent most of 2005 complaining about the lack of credit lines.

Brazil already has some of the lowest levels of farming subsidies in the world, along with New Zealand. If you add to the equation a shortage of finance options after a year of substantial losses due to drought and Asian soybean rust, it's easy to understand why producers are wary about the upcoming harvest.

Renato, an agronomist at the Carol Cooperative in South-Central Brazil (Uberaba) says sales of micronutrients have dropped at least 30% this year, compared to last year. He blames the reduction on lack of credit available to producers. In fact, a lot of farmers still owe last year's fertilizer input costs to the cooperative and can't buy any more this year.

Exchange Rate: As a local saying goes: When the Chicago Board of Trade sneezes, Brazilian farmers get a cold. But if the U.S. dollar is weak, producers are taken to the emergency room, especially when international soybean prices remain low.

After averaging 3.20 reals during the 2003-04 season, the dollar has steadily lost value, and by mid-October 2005 was quoted at 2.25 reals, with no recovery in sight. Keep in mind that both oil-based inputs and soybeans themselves are quoted in dollars.

Input Prices: This may be the most critical of all factors. With new legislation legalizing the use of biotech seeds, Monsanto can now officially charge royalties and a tech fee for its Roundup Ready seeds, and farmers consider the amounts abusive.

While international soybean prices and the U.S. dollar rate remain low, input prices have not come down and producers would expect to break even at best. Interestingly, Renato at Coopartiva Carol says sales of other inputs, like herbicides and pesticides, remain about the same.

Will that mean farmers will plant as much as last year, but cut their costs by using less expensive inputs to correct the usually poor soil?

In a speech given Oct. 14, Agriculture Minister Roberto Rodrigues said Brazilian agriculture “is at the bottom of the well,” and estimated GDP losses of almost $8 billion due to the current bleak agricultural scenario.

Experts seem to be in agreement with Rodrigues. Ag consultant Celeres estimates a reduction of more than 1.4 million acres in the total area planted with soybeans, almost half of which is in Mato Grosso alone. The state is Brazil's largest producer and suffered extremely heavy losses in the past season thanks to excessive rainfall during harvesting along with rust and insect attacks.

Celeres also projects a 40 bu./acre yield for the upcoming harvest, but government agronomists are not so optimistic.

With high input prices, no capital and no credit lines, farmers are bound to use more “pirate” and brown-bagged seeds and yields may come down dramatically. Application of fertilizers is at its lowest, and the same is expected to happen with herbicides, insecticides and pesticides, which should contribute even more to a reduction in productivity.

Leandro, another agronomist with the Carol Cooperative, in Catalão, Goiás, says that sales of herbicides have dropped 20% compared to the same period last year. He says it's mostly because farmers here are deeply in debt and can't pay for much more new product.